A progressive voice shining light into the darkness of regressive politics. Pretty much anything will be fair game, and little will be held sacred.

Sunday, August 25, 2013

On Keystone XL ... Why?

I've generally stayed quiet on the subject of Keystone XL. Not because I don't have opinions about the pipeline, or questions about it, but because the entire proposition has struck me as rather ridiculous from the outset.

Think about it for a moment. Here we are, investing billions of dollars to extract bitumen from the oil sands projects in northern Alberta, and then we are just going to ship it off to refineries elsewhere to turn into usable products - refineries who will sell the final product back to Canada at very high prices, no doubt.

I'm sure that the analysts in TCPL who first dreamed up this pipeline project did all of the number crunching and determined that TCPL stands to make a handsome profit from moving all the raw (or minimally upgraded) bitumen down to Oklahoma for refining.

For the last year, we've been hearing how we get about half the price per barrel of crude out of the oilsands that is the published price on the world markets. Shipping the raw material off to China seems equally short sighted to me. Frankly, I just don't get it. Why are we talking about shipping raw material out of country for processing? It's not like Canada doesn't have the capability to build and operate refineries.

Perhaps more interesting is the sentiments in this article from Forbes. It is, rightly asking why are we even bothering to build Keystone XL.

The tar sands are also a contentious issue within Canada (John Richardson, Esquire). Building a pipeline that takes the tar sand crude to the Canadian Pacific Coast is meeting fierce citizen resistance. The Canadian government is employing rather draconian tactics in squashing this opposition, including destroying scientists careers if they discuss scientific results that do not support the tar sands development (Thomas Homer-Dixon). This is a different kind of cost to that country.

I’m not sure why Canada doesn’t just build refineries near the tar sands and then move the refined products to the coast where new port facilities would be built to handle the super-tankers from China. It would be a lot more lucrative for Canada in the long-run, and less environmentally risky. But it would require more up-front capital and construction and take a bit longer than using our refineries.

Ultimately, this asks the fundamental question that Canadians should have been asking a long time ago - namely why are we just selling the raw resources? There has always been more money in refined product. The argument that "there's already refinery capacity in the US" has never made sense to me.

Canada needs to look to its own future, and if that means insisting that we make investments in building the infrastructure to be able to manufacture refined product, then so be it. If that angers "investors" from other countries, tough luck to them. In the long run, Canada will be more prosperous if we look at doing things for ourselves, not just continuing to sell the raw resource materials to others to upgrade.

Keystone XL has become mired in political wrangling. Frankly, I don't blame Obama for being unwilling to make a clear decision on the project. No matter which way he goes, it's a political lose situation for him. Kicking the ball down the field is probably the least damaging thing that he can do politically.

As time has gone on, I have become less and less thrilled with the idea of Keystone XL, or for that matter the Northern Gateway alternative. Both of them continue the old pattern of Canada drawing the raw resources out of the ground and selling them, instead of making the end product. The current rush to sell everything we have today seems foolhardy indeed - if the bitumen stays in the ground for a few years, it will still be there when we are able to extract and refine it into something more useful.